Acquisition of NBC Universal by Comcast

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The Comcast logo after the acquisition.

In December 2009, Comcast announced its intent to acquire a majority stake in the media conglomerate NBC Universal from GE. The planned acquisition was subject to scrutiny from activists and government officials; their concerns primarily surrounded the potential effects of the vertical integration that the acquisition could create, as Comcast is also heavily involved in cable television and internet services in many media markets.[1] The deal went through, resulting in Comcast owning 51% of the company until March 2013, when GE divested its stake; Comcast now owns 100% of NBCUniversal.

History[edit]

Background[edit]

Comcast was, at the time, the largest cable television provider in the United States. It also owned a number of major cable networks, including E!, Golf Channel, and Versus. In 2004, Comcast attempted a hostile takeover of The Walt Disney Company for $41 billion, which would have made Comcast the world's largest media conglomerate, if approved. The deal ultimately fell through, however; Comcast's motivation for the deal was centered around gaining control of ESPN, which a Comcast executive described as "the most important and valuable asset" in Disney's portfolio. The same year, General Electric acquired an 80% stake in Universal Studios from Vivendi, which merged into NBC to form NBC Universal. By 2009, the company's financial performance had struggled due in part to the poor performance of recent Universal Pictures' productions, and NBC, who was at the time, ranked 4th among the major broadcast television networks. By contrast, some of its cable networks (such as MSNBC SyFy, and USA Network) were reporting steady gains in viewership. After the failed Disney deal, Comcast focused on its existing networks (along with its Comcast SportsNet regional sports networks), and acquired a stake in the movie studio MGM.[2][3]

Proposal[edit]

Negotiations between Comcast and NBC Universal for a potential acquisition began as early as March 2009; News Corporation and Time Warner were also reportedly interested in purchasing the company. By September 2009, Comcast had successfully negotiated a purchase of a stake in the company from GE, but the overall deal was held up by negotiations with Vivendi for the sale of its 20% stake to GE.[2] On December 3, 2009, Comcast officially announced its intent to acquire a 51% majority stake in NBC Universal; the deal would be structured as sale of Vivendi's stake in the company to GE for $5.8 billion, followed by Comcast paying $6.5 billion for a stake of NBC Universal, and contributing its existing media properties to the company, themselves valued at $7.25 billion. As a result, NBC Universal would become a joint venture between Comcast and GE, with Comcast holding a 51% majority stake. The deal, as a whole, valued NBC Universal at $30 billion. The deal also included an option for General Electric to sell further stakes in the company to Comcast over a seven-year period, or Comcast to buy stakes at "specified times". Jeff Zucker was to remain CEO of NBC Universal after the acquisition, and remain headquartered in New York, but would report to Comcast.[4]

Comcast CEO Brian L. Roberts described the deal as a "perfect fit" for the company, as Comcast would be able to bolster its role as a creator and distributor of content, with a particular emphasis on "[the] multiplatform ‘anytime, anywhere’ media that American consumers are demanding"; increasing access to NBC-owned content through various platforms. The deal would also add Comcast's own cable channels to NBCU's existing suite of cable networks, contributing to 82% of the merged company's total revenue. Despite the focus on cable, Comcast also promised to remain committed to over-the-air broadcasting, and also promised an increased amount an increased amount of local news, children's programming, and Spanish language programming across various platforms, including over-the-air.[5] GE's CEO Jeffrey R. Immelt justified the deal, citing a desire to move purely back into the industrial industry, and was also motivated by the Great Recession.[4]

The deal was subject to the approval of the Federal Communications Commission (FCC); due to the magnitude of the deal, it was placed under heavy scrutiny by the Commission, who held hearings on the deal and its effects on the public's access to media.[4]

Opposition[edit]

The acquisition was opposed by a number of media activists, particularly those who were against vertical integration. Free Press argued that Comcast would use the deal to stifle competition in online video by restricting where NBC-owned content can be offered, and charge higher rates to television providers for accessing NBC-owned networks; having to pass these charges on to consumers.[5][6] There were concerns from the owners of NBC's affiliates, who urged the FCC to require that Comcast maintain NBC programming on over-the-air television, and not move it exclusively to cable. A number of competing internet service and television providers also urged the FCC to place conditions on Comcast if the deal were to be approved, including requiring that Comcast adhere to the principles of net neutrality, offer wholesale access to its broadband services, and place limits on how Comcast can leverage its NBC-owned stations in retransmission consent negotiations to inhibit competition. AOL also proposed that the FCC enforce its program access rules for Comcast's online video content as well, requiring the provider to offer it to competitors at a fair rate. By June 22, 2010, over 32,000 comments had been sent to the FCC in relation to the deal.[7]

Approval of acquisition[edit]

On January 18, 2011, the FCC and the United States Department of Justice approved the acquisition.

Four months later, Meredith Attwell Baker, the FCC commissioner who approved the deal, was hired as a lobbyist by Comcast.[8]

Divestment by GE[edit]

Comcast intended to buy out the rest of GE's stake of NBC Universal over the following seven years. Ownership remained split at 51%–49% for four years. Then, on February 12, 2013, Comcast announced its intention to complete the purchase all at once and assume 100% ownership of the company by the end of March.[9][10] The acquisition was completed March 19, 2013.[11]

Scale of new company[edit]

The Comcast-NBC consolidation expands Comcast both vertically and horizontally within the media market. Vertical integration includes the combination of video producer (NBC) and video distributor (Comcast). Horizontal integration includes adding NBC’s programming, such as Bravo and others to Comcast’s programming, including the Golf channel, E! and others; secondly, adding NBC’s broadcasting station to Comcast’s video network.

Mark Leccese summarizes the huge scale of the new company personally:

“10 TV and movie production studios (including Universal Pictures), 20 cable channels, 11 regional broadcast TV stations, 15 Telemundo stations, 9 regional sports cable networks, one regional news cable station (New England Cable News), a whole bunch of websites, two pro sports teams in Philadelphia and two arenas, a food service vendor, a ticket agency, and four theme parks. And some other stuff.”[12]

Some scholars also summarize and list the significant scale and scope of the new company more completely in their academic journal named The Proposed Comcast-NBCUniversal Combination. This is the integrated-version list.

“Through the merger, Comcast-NBC would control media and entertainment properties including:[13]

  • Comcast’s cable systems, which currently serve 24.2 million subscribers, making Comcast the largest multichannel video programming distributor (MVPD) in the United States;
  • Comcast’s broadband network, which passes more than 50 million homes and provides high speed Internet service to just under 15 million households, making Comcast the largest residential internet service provider (ISP) in the United States;
  • A number of national cable networks, including NBC’s USA, Bravo, CNBC, MSNBC, Oxygen, and Syfy networks and Comcast’s E!, Style, Golf Channel, and Versus networks, as well as minority interests in the A&E, Biography, History Channel, Weather Channel, and Lifetime cable networks, and small interests in the Big Ten, NHL, and MLB cable networks;
  • Comcast’s 10 regional cable sports networks;
  • The NBC national broadcast television network, including NBC News (a leading source of global and national news with top-rated news programming), NBC Entertainment, and NBCUniversal Sports (The Olympics, NBC Sunday Night Football, NHL/Stanley Cup, the PGA Tour, the U.S. Open, the Ryder Cup, Wimbledon, and the Kentucky Derby);
  • NBC’s Telemundo national broadcast television network, the second-largest Spanish language programming network in the United States;
  • NBC’s ten owned and operated local broadcast stations, which carry the NBC network programming in large U.S. markets, including New York, Los Angeles, Chicago, and Philadelphia;
  • NBC’s 16 owned and operated local broadcast stations, which carry the Telemundo network programming in cities with large Spanish-speaking populations, including Los Angeles, New York, Miami, Houston, Chicago, Puerto Rico and Dallas;
  • NBCUniversals’s large television production operations, which produce broadcast network programming, NBCUniversal Television Distribution’s broadcast program syndication operations, and a 3,000-title library of television episodes;
  • NBCUniversals’s Universal Pictures and Focus Features, which produce theatrical and non-theatrical films, as well as Universal Studio Home Entertainment’s extensive movie library with more than 4,000 titles;
  • Digital media properties, including CNBC.com, IVillage, NBC.com, Fandango, and Daily Candy, which together generate more than 40 million unique users each month;
  • NBC’s 30% interest in Hulu.com, a website that offers free, advertising supported streaming video of broadcast and cable television programs.”
  • 50% stakes in StudioCanal and Canal+ which is the largest pay channel in Europe and holds the third largest film library in the world, along with all distribution rights (outside North America) to the Miramax Films Library

Influence[edit]

It is certain that the video marketplace has changed structurally with or without Comcast-NBC acquisition. More and more videos, programs and advertisements are displayed on the Internet, not the traditional media channel, television. The video business model has gradually changed as time goes by. Comcast has reached such a significant scale that it now owns a huge large amount of media and entertainment properties. However, facing the uncertainty of video marketplace, many people proposed their concerns:

A. How Comcast-NBC affects video market

One of the claims is “Comcast Would Be Able to Use its Vertically Integrated Position to Deny Rival Distributors Access to Programming or to Raise the Cost of That Programming”. Comcast-NBC will face two rival distributors – the satellite and telephone company and the new entrant. Of course, both of them are worrying about the domination which Comcast-NBC may be capable of establishing and the entry barrier. The big challenge for the satellite and telephone company is to find a new business model to convince the programmers that their model will benefit them more than Comcast-NBC. However, Comcast-NBC also keeps improving their business model, which is unhappy to the new entrant. The other claim is “Comcast Will Use the Merger to Change NBC into a Cable Network, at the Expense of Local Programming”. Some observers predict that Comcast may convert NBC to a cable network. They think that Comcast must have to make some changes because NBC broadcast station traditionally has only one revenue path, the advertising;[14]

B. How Comcast-NBC affects public policy applied to the range of competition, diversity and localism of media company

As far as media ownership, competition, diversity and localism are the three major topics. Once two or more media company amalgamated, many critics were always suggested immediately, such as the case of merge of News Corp/DirecTV and Sirius-XM. They thought that merger with too much power will harm the competition, diversity of the media marketplace and even the democracy of this country. Some of them directly called it “Merger to Monopoly”. FCC Commissioner Copps once criticized personally, “It will create a single company with enormous influence over politics, art and culture across the nation and especially in the New York metropolitan area.” No doubt localism is also affected by this merger. One obvious change is that the new entity who acts as a gatekeeper will limit the local or independent voices to get to the slots on the media distribution system. Free Press has conveyed this concern, “The new entity will have an incentive to prioritize NBC shows over other local and independent voices and programs, making it even harder to find alternatives on the cable dial.”[15]

C. Whether the merger indeed benefits the shareholders and consumers

One of the claims is “A combined Comcast-NBCUniversal might have the unique ability to craft new business models that benefit consumers.” With the development of new digital technologies to distribute videos, advertising revenues have not been generated in the new market. Therefore, these enterprise operators have to find out a new business model in order to make the revenues financially available. Facing the uncertain environment, the Comcast Senior Vice President for Corporate Development, Robert Pick still shows his determination. He says, “the combination would ameliorate the negotiations friction that had made it difficult for Comcast, primarily a distribution and communications company, to convince content owners and programmers to work with us to create and deliver more content to consumers in a greater variety of ways.”[16]

D. How Comcast-NBC changes the price of video markets

Many observers predict that the price of distributing videos is going to fall dramatically in the near future because three distribution products of Comcast (Broadcast-TV-Internet) are all merging into the network. Wall Street Journal business columnist Holman Jenkins says, “Customers want the product for free. Comcast’s lifeblood, the $100-a-month cable bill and the $50-a-month broadband bill, increasingly look like duplicative expenses. And so on.” In order to recover the lost revenue from content, Comcast-NBC may enhance their business on service of advertising, subscription and etc.[17]

On-air effects[edit]

The fifth season of the NBC series 30 Rock directly acknowledged the acquisition with a storyline involving the fictional NBC (which the show is based around) being acquired by a Philadelphia-based cable company called Kabletown, a parody of Comcast. On the same day that Comcast executive Steve Burke met with his new NBC employees, a new episode, coincidentally, opened with a Kabletown sign being installed on the GE Building.[18]

The first major on-air effects of the Comcast/NBCUniversal deal, in real life, occurred in February 2011, when Comcast began to align its sports properties with the NBC Sports division; the Comcast Sports Group was renamed NBC Sports Group, with Mark Lazarus, formerly the head of Turner Entertainment Group, heading its cable networks.[19] NBC Sports talent could now appear on Comcast networks such as Golf Channel; NBC's golf coverage was re-branded as Golf Channel on NBC beginning at the 2011 WGC-Accenture Match Play Championship.[20][21] On August 1, 2011, Comcast announced that its Versus network would be re-named NBC Sports Network on January 2, 2012.[22]

See also[edit]

References[edit]

  1. ^ Tim Barwell (3 October 2009). "Comcast, NBC Deal Faces Financial, Legal Obstacles, WSJ Reports". Bloomberg. Retrieved 2011-04-06. 
  2. ^ a b David Goldman and Julianne Pepitone, CNNMoney.com staff writers (2009-12-03). "GE, Comcast announce NBC Universal joint venture deal". CNN Money. Retrieved 2013-03-04. 
  3. ^ Larry Eichel (22 Feb 2004). "ESPN is a big factor in bid for Disney Comcast...". The Philadelphia Inquirer. Retrieved 27 Feb 2014. 
  4. ^ a b c Arango T (3 Dec 2009). "Comcast/NBC merger: Trouble or trivia?". The New York Times. Retrieved 7 April 2011. 
  5. ^ a b Newman J (28 Jan 2010). "Comcast, NBC Acquisition: Pros and Cons for You". PC World. Retrieved 19 April 2011. 
  6. ^ "Opponents Line Up Against Proposed Comcast/NBC Merger". DailyFinance. AOL. Retrieved 2 April 2014. 
  7. ^ "Comcast Rivals, Partners Seek Conditions on NBC Deal". The Wall Street Journal. Retrieved 24 April 2014. 
  8. ^ Anderson, Nate (May 11, 2011). "After approving NBC buyout, FCC Commish becomes Comcast lobbyist". Ars Technica. Retrieved 2012-02-13. 
  9. ^ Nakashima, Ryan (2013-02-12). "Comcast to buy GE's 49 pct stake in NBCUniversal". MSN. Associated Press. Retrieved 2013-02-12. 
  10. ^ Chozick, Amy; Stelter, Brian (2013-02-12). "Comcast Buys Rest of NBC in Early Sale". The New York Times. Retrieved 2013-02-24. 
  11. ^ Lieberman, David. "Comcast Completes Acquisition Of GE’s 49% Stake In NBCUniversal." Deadline.com (March 19, 2013)
  12. ^ Leccese, M (19 Jan 2011). "Comcast/NBC merger: Trouble or trivia?". Boston.com. Retrieved 7 April 2011. 
  13. ^ Goldfarb, Charles B. (February 2010). The Proposed Comcast-NBCUniversal Combination: How It Might Affect the Video Market. Congressional Research Service. pp. 1–2. 
  14. ^ Goldfarb, Charles B. (February 2010). The Proposed Comcast-NBCUniversal Combination: How It Might Affect the Video Market. Congressional Research Service. p. 21. 
  15. ^ Thierer, Adam (December 2009). "A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC". Progress on Point 16: 5–8. 
  16. ^ Goldfarb, Charles B. (February 2010). The Proposed Comcast-NBCUniversal Combination: How It Might Affect the Video Market. Congressional Research Service. p. 29. 
  17. ^ Thierer, Adam (December 2009). "A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC". Progress on Point 16: 10. 
  18. ^ nymag.com (27 Jan 2011). "Kabletown Eerily Takes Over 30 Rock the Same Day Comcast Takes Over NBC". NY Mag. Retrieved 2011-04-25. 
  19. ^ Weinstein, Joshua L. (February 2, 2011). "Mark Lazarus to Head NBC Sports Group's Executive Team". The Wrap. Retrieved October 6, 2012. 
  20. ^ Reynolds, Mike. "Golf Channel, NBC Tee Off As Playing Partners With WGC Tourney". Multichannel News. Retrieved 21 February 2011. 
  21. ^ Williams, Jim. "Jim Williams: Golf coverage has new look". Washington Examiner. 
  22. ^ Fernadez, Bob. "Goodbye Versus, hello NBC Sports Network". Philadelphia Inquirer. Retrieved August 1, 2011. 

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